Yo, Money Matters Knowledge Quiz

A debit card can be used to make purchases for various items, including a morning latte, school textbooks, and weekly groceries. Debit cards are linked to a person's bank account, allowing them to make payments directly from their available funds. Therefore, all of the options listed can be purchased using a debit card.

Debit cards are more similar to cash than credit cards because both debit cards and cash allow for immediate payment and do not involve borrowing money. When using a debit card, the funds are directly deducted from the user's bank account, just like when paying with cash. On the other hand, credit cards involve borrowing money from the card issuer, which needs to be paid back later with interest. Therefore, debit cards are a closer equivalent to cash in terms of payment method.

The major advantage of a debit card over a credit card is that you don't have to pay interest or monthly bills. Unlike a credit card, which allows you to borrow money from a lender and requires you to pay it back with interest, a debit card is linked directly to your bank account and allows you to spend only the money you have. This means that there are no interest charges or monthly bills to worry about, as you are using your own funds for purchases.

A credit score is used for all of the given options. Firstly, it helps financial institutions determine how much money you can borrow from them. This is because a higher credit score indicates a lower risk of defaulting on payments, making you eligible for larger loans. Secondly, your credit score is used to determine your interest rate. A higher credit score usually results in a lower interest rate, as it reflects a lower risk for lenders. Finally, your credit score reveals your reputation as a borrower, showcasing your history of managing credit and debt.

Debit cards do not have a credit limit because they are linked directly to the cardholder's bank account. When a purchase is made using a debit card, the funds are immediately deducted from the account. Unlike credit cards, debit cards do not allow the cardholder to spend beyond the available balance in their account. Therefore, the statement that debit cards have a credit limit is false.

Compounded interest takes into account the accrued interest from previous months. This means that the interest earned in each period is added to the principal amount, and the subsequent interest is calculated based on the new total. As a result, the interest amount grows exponentially over time. Simple interest, on the other hand, only considers the initial principal amount and does not take into account any previously earned interest. Therefore, compounded interest generates a higher interest amount compared to simple interest. The statement that compounded interest is only used by banks is not true, as it is a common concept used in various financial transactions and investments.

A checking account is a type of bank account that allows individuals to deposit and withdraw money. It provides a convenient way to manage personal finances by allowing transactions such as cash deposits, check deposits, electronic transfers, and withdrawals through various channels like ATMs, online banking, and in-person transactions. Unlike a savings account, a checking account is designed for frequent transactions and easy access to funds, making it suitable for day-to-day expenses and bill payments. Therefore, the statement "A checking account allows you to deposit and withdraw money" is true.

The correct answer is the rate at which a borrower is charged by a lender, expressed as a percentage of principal. This explanation accurately describes the concept of an interest rate, which is the cost of borrowing money. It is expressed as a percentage and represents the fee charged by a lender to a borrower for the use of their funds. The interest rate is typically based on the principal amount borrowed and is charged over a specific period of time.

A savings account allows for a limited amount of withdrawals and deposits because it is designed to encourage individuals to save money rather than use it for frequent transactions. This limitation helps individuals to build up their savings over time by discouraging excessive spending or frequent withdrawals.

A good credit score is considered to be 750 or higher. This indicates a strong credit history and responsible financial behavior. Lenders and financial institutions generally view individuals with a credit score of 750 or above as low-risk borrowers, making it easier for them to obtain loans, credit cards, and favorable interest rates. A higher credit score reflects a higher likelihood of timely payments and lower credit utilization, which are key factors in determining creditworthiness.

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Savings accounts generally offer a higher interest rate than checking accounts. This is because savings accounts are designed for individuals to save money over a longer period of time, while checking accounts are meant for everyday transactions. The higher interest rate on savings accounts incentivizes individuals to keep their money in the account and earn more over time.

Research shows that a significant portion of people share their PIN number with at least one person. This suggests that a substantial number of individuals are not keeping their PIN numbers confidential and are potentially putting their financial security at risk. Sharing PIN numbers can lead to unauthorized access to personal accounts and potential financial loss. Therefore, it is crucial for individuals to understand the importance of keeping their PIN numbers private and not sharing them with anyone.

The correct answer is that a card's magnetic strip must be 3.375 inches wide to accommodate necessary information. This is because the magnetic strip on credit cards contains important data that is required for transactions. In order to fit all the necessary information on the strip, it needs to be a specific size. Therefore, credit cards have become standardized to ensure that the magnetic strip can accommodate the required information.

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